Correction to This Article
Earlier versions of this story gave an incorrect figure for Iraqi oil production. Oil production stands at roughly 2 million barrels a day, compared with 2.6 million before U.S. troops entered Iraq in March 2003, according to U.S. government statistics. This story has been updated to reflect that corrected information.

U.S. Has End in Sight on Iraq Rebuilding
Documents Show Much of the Funding Diverted to Security, Justice System and Hussein Inquiry

BAGHDAD -- The Bush administration does not intend to seek any new funds for Iraq reconstruction in the budget request going before Congress in February, officials say. The decision signals the winding down of an $18.4 billion U.S. rebuilding effort in which roughly half of the money was eaten away by the insurgency, a buildup of Iraq's criminal justice system and the investigation and trial of Saddam Hussein.

Just under 20 percent of the reconstruction package remains unallocated. When the last of the $18.4 billion is spent, U.S. officials in Baghdad have made clear, other foreign donors and the fledgling Iraqi government will have to take up what authorities say is tens of billions of dollars of work yet to be done merely to bring reliable electricity, water and other services to Iraq's 26 million people.

"The U.S. never intended to completely rebuild Iraq," Brig. Gen. William McCoy, the Army Corps of Engineers commander overseeing the work, told reporters at a recent news conference. In an interview this past week, McCoy said: "This was just supposed to be a jump-start."

Since the reconstruction effort began in 2003, midcourse changes by U.S. officials have shifted at least $2.5 billion from the rebuilding of Iraq's decrepit electrical, education, water, sewage, sanitation and oil networks to build new security forces for Iraq and to construct a nationwide system of medium- and maximum-security prisons and detention centers that meet international standards, according to reconstruction officials and documents. Many of the changes were forced by an insurgency more fierce than the United States had expected when its troops entered Iraq.

In addition, from 14 percent to 22 percent of the cost of every nonmilitary reconstruction project goes toward security against insurgent attacks, according to reconstruction officials in Baghdad. In Washington, the office of the Special Inspector General for Iraq Reconstruction puts the security costs of each project at 25 percent.

U.S. officials more than doubled the size of the Iraqi army, which they initially planned to build to only 40,000 troops. An item-by-item inspection of reallocated funds reveals how priorities were shifted rapidly to fund initiatives addressing the needs of a new Iraq: a 300-man Iraqi hostage-rescue force that authorities say stages operations almost every night in Baghdad; more than 600 Iraqis trained to dispose of bombs and protect against suicide bombs; four battalions of Iraqi special forces to protect the oil and electric networks; safe houses and armored cars for judges; $7.8 million worth of bulletproof vests for firefighters; and a center in the city of Kirkuk for treating victims of torture.

At the same time, the hundreds of Americans and Iraqis who have devoted themselves to the reconstruction effort point to 3,600 projects that the United States has completed or intends to finish before the $18.4 billion runs out around the end of 2006. These include work on 900 schools, construction of hospitals and nearly 160 health care centers and clinics, and repairs on or construction of nearly 800 miles of highways, city streets and village roads.

But the insurgency has set back efforts across the board. In two of the most crucial areas, electricity and oil production, relentless sabotage has kept output at or below prewar levels despite the expenditure of hundreds of millions of American dollars and countless man-hours. Oil production stands at roughly 2 million barrels a day, compared with 2.6 million before U.S. troops entered Iraq in March 2003, according to U.S. government statistics.

The national electrical grid has an average daily output of 4,000 megawatts, about 400 megawatts less than its prewar level.

Iraqis nationwide receive on average less than 12 hours of power a day. For residents of Baghdad, it was six hours a day last month, according to a U.S. count, though many residents say that figure is high.

The Americans, said Zaid Saleem, 26, who works at a market in Baghdad, "are the best in destroying things but they are the worst in rebuilding."

The Price of Security

In a speech on Aug. 8, 2003, President Bush promised more for Iraq.

"In a lot of places, the infrastructure is as good as it was at prewar levels, which is satisfactory, but it's not the ultimate aim. The ultimate aim is for the infrastructure to be the best in the region," Bush said.

U.S. officials at the time promised a steady supply of 6,000 megawatts of electricity and a return to oil production output of 2.5 million barrels a day, within months.

But the insurgency changed everything.

"Good morning, gentlemen," a security contractor in shirt-sleeves said crisply late last week, launching into a security briefing in what amounts to a reconstruction war room in Baghdad's Green Zone, home to much of the Iraqi government.

Other private security contractors hunched over desks in front of him, learning the state of play for what would be roughly 200 missions that day to serve the 865 U.S. reconstruction projects underway -- taking inspectors to work sites, guarding convoys of building materials or escorting dignitaries to see works in progress, among other jobs.

A screen overhead detailed the previous day's 70 or so attacks on private, military and Iraqi security forces. The briefer noted bombs planted in potholes, rigged in cars, hidden in the vests of suicide attackers. There were also mortar attacks and small-arms fire. The briefer also noted miles of roads rendered impassable or where travel was inadvisable owing to attacks, and some of the previous day's toll in terms of dead and wounded.

Colored blocks on the screen marked convoys en route, each tracked by transponders and equipped with panic buttons.

To one side, a TV monitor scrolled out the day's news, including McCoy's remark to reporters that December was the worst month on record for Iraqi contractors working on reconstruction, with more killed, wounded or kidnapped than during any other month since the U.S. invasion.

"For every three steps forward, we take one step back. Those are the conditions we face," said Col. Bjarne Iverson, commander of the reconstruction operations center. He followed with a comment often used by American authorities in Iraq: "There are people who just want us to fail here."

The heavy emphasis on security, and the money it would cost, had not been anticipated in the early months of the U.S. occupation. In January 2004, after the first disbursements of the $18.4 billion reconstruction package, the United States planned only $3.2 billion to build up Iraq's army and police. But as the insurgency intensified, money was shifted from other sectors, including more than $1 billion earmarked for electricity, to build a police force and army capable of combating foreign and domestic guerrillas.

In addition to training and equipping police and soldiers, money has been spent for special operations and quick-response forces, commandos and other special police, as well as public-order brigades, hostage-rescue forces, infrastructure guards and other specialized units.

In the process, the United States will spend $437 million on border fortresses and guards, about $100 million more than the amount dedicated to roads, bridges and public buildings, including schools. Education programs have been allocated $99 million; the United States is spending $107 million to build a secure communications network for security forces.

Hundreds of millions of dollars were shifted to fund elections and to take Iraq through four changes of government. Funds were also reallocated to provide a $767 million increase in spending on Iraq's justice system. The money has gone toward building or renovating 10 medium- and maximum-security prisons -- early plans called for four prisons -- and for detention centers nationwide.

Tens of millions of dollars more are going to pay for courts, prosecutors and investigations. Millions are going to create safe houses for judges and for witness protection programs.

The criminal justice spending has been intertwined with the drive to try Hussein. The costs have been high, including $128 million to exhume and examine at least five mass grave sites.

A Gap in Perspective

The shifts in allocations have led Stuart Bowen, the inspector general in charge of tracking the $18.4 billion, to talk of a "reconstruction gap," or the difference between what Iraqis and Americans expected from the U.S. reconstruction effort at first and what they are seeing now.

The inspector general's office is conducting an audit to quantify the shortfall between expectations and performance, spokesman Jim Mitchell said.

McCoy, the Army Corps of Engineers commander for reconstruction, cites a poll conducted earlier last year that found less than 30 percent of Iraqis knew that any reconstruction efforts were underway. The percentage has since risen to more than 40 percent, McCoy said.

"It is easy for the Americans to say, 'We are doing reconstruction in Iraq,' and we hear that. But to make us believe it, they should show us where this reconstruction is," said Mustafa Sidqi Murthada, owner of a men's clothing store in Baghdad. "Maybe they are doing this reconstruction for them in the Green Zone. But this is not for the Iraqis."

"Believe me, they are not doing this," he said, "unless they consider rebuilding of their military bases reconstruction."

U.S. officials say comparatively minor sabotage to distribution systems is keeping Iraqis from seeing the gains from scores of projects to increase electricity generation and oil production. To showcase a rebuilt school or government building, meanwhile, is to invite insurgents to bomb it.

If 2006 brings political stability and an easing of the insurgency, Americans say, the distribution systems can be fairly easily repaired.

"The good news is this investment is not in any way lost; they're there," said Dan Speckhard, the director of the U.S. reconstruction management office in Iraq. "They will pay off, they will be felt, if not this month, then six months down the road."

While the Bush administration is not seeking any new reconstruction funds for Iraq, commanders here have military discretionary funds they can use for small reconstruction projects. The U.S. Agency for International Development is expected to undertake some building projects, as it does in 80 other countries, with money from the foreign appropriations bill.